This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

AIG Attorneys Question Key Player in $8.5B Bank of America Settlement (Update 1)

Stocks in this article: AIG BAC

Updated from 5:53 p.m. ET 9/12/2013 to include additional details from BTIG analyst Mark Palmer in sixth paragraph.

NEW YORK ( TheStreet) -- Bank of America's (BAC - Get Report) attempts to win approval for a controversial $8.5 billion mortgage settlement faced a stiff challenge Thursday as attorneys for AIG (AIG - Get Report) and other objectors questioned one of the key outside experts used to assess the reasonableness of that figure, in day 23 of hearings before New York State Supreme Court Judge Barbara Kapnick.

The proposed $8.5 billion settlement between Bank of America and 22 big investors including Goldman Sachs (GS), BlackRock (BLK), PIMCO and the Federal Reserve Bank of New York's Maiden Lane entities covers $108 billion in losses on mortgage-backed securities. It was agreed upon in June 2011 but has yet to be approved. Hearings resumed this week following a 45-day hiatus.

Objectors to the proposed settlement, of which bondholder AIG is by far the most prominent, contend the $8.5 billion figure was too low and that BNY Mellon (BK), the trustee assigned to look out for the interest of bondholders, was conflicted due to extensive business ties with Bank of America. As a consequence, BNY Mellon didn't push to come up with the best deal for bondholders, AIG's attorneys argue. Despite those objections, the settlement has been called the largest tied to the financial crisis ignited when Lehman Brothers filed for bankruptcy five years ago.

One of the key experts responsible for assessing the reasonableness of the $8.5 billion figure was Brian Lin, a principal at RRMS Advisors, an obscure three-person office in Manhattan's diamond district. I visited RRMS's offices earlier this year for this video.

AIG's attorneys attempted to show that Lin was essentially there to rubber stamp a pennies-on-the-dollar settlement and that neither he nor BNY Mellon were as aggressive as they should have been in trying to extract a larger number.

During more than an hour of questioning Thursday morning, Larry Pozner, a partner at law firm Reilly Pozner representing AIG, established that Lin made no effort to recover money from Bank of America for poor mortgage servicing, even though the Federal Trade Commission fined the bank $108 million for lapses in that area. Mortgage servicing involves the collecting of mortgage payments from home owners, among other duties.

What's more, Lin did acknowledge "that he had heard that Countrywide had created subsidiaries that had overcharged trust investors for services," BTIG analyst Mark Palmer pointed out in a research note Friday.

Lin also conceded that though the settlement required Bank of America to improve its mortgage servicing, BNY Mellon never asked him to examine how the bank was servicing mortgages in the first place. Further, Pozner argued Bank of America was already required to improve its mortgage servicing as part of a consent order with the Office of the Comptroller of the Currency signed by Bank of America management March 29, 2011. As a result, achieving the same results when the $8.5 billion settlement was agreed upon three months later was meaningless, Pozner contended.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs